There is something quite satisfying about dividends. In my view, dividend yield can be one of the most reliable methods of valuing shares. It allows investors to compare different shares in the same sector, different shares in different sectors and different market, too. It is even possible to compare shares against bonds, and to compare shares against property yields.
A high dividend can be a sign that a company is doing well, and that it is rewarding investors by paying out a significant proportion of its profits as dividends. According to Thomson Financial Datastream, around £46b a year is now paid out to stock market investors in dividends. This represents an average yield of around 3%….